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Japanese stocks hit a new 2012 high today (Wednesday) and the yen weakened to a 20-month low against the U.S. dollar as Shinzo Abe was installed as Japan's 96th prime minister.

Abe, who served as prime minister in 2006-2007 but stepped down due to health issues, has vowed to pursue aggressive monetary easing to end deflation and get the Japanese economy growing again.

But the long-term implications of Abe's policies aren't as rosy as the short-term stocks boost.

"The hope is that Abe's promises of fresh stimulus, unlimited spending and placing a priority on domestic infrastructure will be the elixir that restores Japan's global muscle," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "As a veteran global trader who actually lives in Japan part time each year, and who has for the last 20+ years, let me make a counterpoint with particular force -don't fall for it."

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Most people have given up on investing in Japan.

With an aging population and far too much government debt, the conventional wisdom is that Japan will never again see the vigorous economic growth it once enjoyed.

The earthquake and tsunami of March 2011 only reinforced this view. However, that tragic episode did have another side.

It showed the resilience and discipline of Japanese society.

There was almost no looting, for example -- and recent economic data suggest that the Japanese economy is not as dead as it seemed.

First quarter Japanese gross domestic product (GDP) came in at an annual growth rate of 4.1% --far higher than the United States, Canada, Australia, or anywhere in the Eurozone.

Given that Japan has been in perpetual near-recession for 21 years, with no surges of productivity like the U.S. enjoyed in the late 1990s, it's really not a bad performance.

You can also see Japan's true strength from its exchange rate, which is currently 79 yen to the dollar, up from around 120 five years ago. That makes visiting Tokyo very expensive.

However, it's also sign of a highly competitive economy.

Investing in Japan: What You Need to Know

It's notable that observers in the United States, a country which perpetually runs payment deficits of $500 billion-$600 billion annually, sneer at the economies of Japan and Germany, which are almost always in surplus.

Before 1995, I lived in another economy that was similar. Britain ran deficits much like the U.S. does.

So believe me when I tell you, deficits are not exactly a sign of superior economic health.